Wall Street Waits on Apple Dividend Hike
Apple's giant pile of cash has been a hot topic of discussion on Wall Street, as analysts size up ways it could be handed out to shareholders.
Brian White, an analyst at Topeka Capital Markets, writes that when it comes to Apple, "cash is clearly on investors' minds."
With the tech giant sitting on $137 billion in cash, investors want to know if it will put some of that money to use by increasing its dividend payout, paying a special dividend or buying back stock.
Speculation was particularly high this week that Apple would make a move since it was just one year ago when Apple initiated its quarterly dividend of $2.65 per share.
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However WisdomTree Asset Mangement's Jeremy Schwartz points out that Apple's dividend payout of nearly $10 billion already makes it the largest technology dividend payer (roughly $2 billion more than Microsoft).
But when it comes to its payout ratio, Apple is at the low end, relative to big cap tech peers. According to Schwartz, Apple's estimated dividend payout ratio based on projected earnings is 23 percent. To put that into perspective, the average estimated dividend payout of four of the largest technology companies (Microsoft, Intel, IBM, Cisco) is 30.3 percent.
If Apple was to increase its dividend payout ratio to 30 percent, "Apple's dividend would grow to approximately $13.71, or $12.9 billion a year," says Schwartz. At its current price, this would amount to a roughly 3 percent dividend yield.
(Read More: Apple to Announce Cash Move Soon: Analyst)
Whether Apple will try to match its tech rivals is still up for debate. Either way, analysts say any type of increase in the payout will be a catalyst for its shares. "We believe creating a safety net around Apple's stock with a larger cash distribution is the first phase necessary to stabilize Apple's stock price," says White.
Apple's stock hit a high of $705 in September 21, 2012. Since then the stock is down better than 35 percent. Recently Apple hit a low of $419, a level that many analysts see as a near term bottom.